Processing

Weekly kill: Rain delivers early impact on slaughter supply, pricing

Jon Condon, 19/08/2014

WHILE it’s still way too early to call it as a turning point, last weekend’s rain episode across large areas of Eastern Australia has at very least had short-term supply and price impact on the slaughter cattle processing dynamic.

processing-1Two of the nation’s three largest processors lifted their Queensland grid prices, or part thereof, since the weekend. To be fair, grids are still in response-phase following the rain, but as outlined below, one large exporter lifted all grassfed grid prices by 10c/kg yesterday, while another has confined that so far to cows, up 5c. Don’t be surprised to see that become more widespread as the week progresses.

Beyond pricing, alone, the weekend rain has had impacts in other areas.

One large multi-site processor said they had had to shift a ‘huge amount’ of cattle around eastern Australia, plugging gaps caused by rain cancellations in some areas, with cattle from elsewhere, in order to keep plants going full bore.

Those access issues are likely to resolve themselves quickly, however, and the cancellations in some cases will simply be deferred, to find kill slots later this week or next. There is no clear evidence yet of cancellations of earlier bookings due to producer sentiment that the drought cycle has ended.

As always happens, sentiment sometimes runs away from reality a little after rain events like this, following a long dry spell. Once producers take stock of exactly what rain did fall, how soil temperatures perform in coming weeks, and how the country responds, it will give a better indication of forward market supply/price trends. Further dry weather could push things back into over-supply territory very quickly.

Several large processors yesterday told Beef Central they had stockpiled a few thousand additional cattle in company-owned and custom feedyards, in anticipation of numbers drying-up temporarily, either in anticipation of the rain last week, or as a result of the widespread falls of 25-50mm (see Beef Central’s Monday rainfall wrap).

One processor this morning said his company had not yet shifted on grid prices, suggesting the market was still in a state of limbo before the true impact was known.

“The phone is dead: nobody is ringing with bookings, but that could change very quickly,” he said.

“The rain in most cases was not significant enough to really impact the market, or deliver a real start to a spring season. It’s more encouragement, than anything else,” he said.

Having said that, he noted a dramatic drop in numbers on offer at Roma store sale today, the nation’s largest regular sale, where agents are drawing for a yarding of only around 1400 head – a fraction of regular yardings of 5000-8000 head seen over the past six months.

He predicted that rain’s pricing impact might be greater on the store market, rather than the slaughter market in coming weeks. Prime cattle sales held across Eastern Australia yesterday and Friday were fairly firm, as processors sought to top-up kills due to earlier direct consignment cancellations. Further supporting that observation, there’s clear evidence of some rise in feeder cattle prices this week.

As anticipated in last Tuesday’s kill report, last week’s Eastern States weekly kill produced a decline in throughput, even in advance of the weekend weather.

That was partly influenced by the Brisbane Show public holiday, which took a few large to very large southeast Queensland plants out of the equation for a day.

The seven-day tally of 162,926 head for Eastern Australia was down about 1.5pc from the previous week, but more importantly, as Beef Central’s home page ‘Industry Dashboard’ graph shows, there’s now been a gradual reduction in rates of kill for the past four weeks. This time a month ago, kills were still screaming along at close to 171,000 head, representing a 5pc reduction since.

And it looks unlikely that kills will show any recovery in numbers this current week, due to the impact of last weekend’s rain and producer response in bookings this week.

Biggest declines were seen in Queensland (-3pc on the week previous) to 80,735 head, and Victoria (-3pc) to 29,390 head. NSW went against the trend, being +3pc to 40,573 head, while South Australia’s kill reached 7726 head, also up 3pc.

 

Grid prices trending up

Some direct consignment grid offers for delivery southeast Queensland sheds have moved upwards since Monday, as a result of the rain and the general contract ion in cattle supply in anticipation late last week.

Values for best cows have lifted 5-10c to a best offer of 300c/kg, especially for September delivery, after slipping as low as 270c a couple of months ago.

One large processor has lifted all grassfed rates 10c, with four-tooth steer now at 330c/kg, prior to discounts, and 300c/kg best cow. Grids for grainfed and MSA cattle have also risen 5c/kg in some company grids, due to the combination of rain and supply.

 

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